More than 21,000 retired federal workers receive lifetime government pensions of $100,000 or more per year, a USA TODAY/Gannett analysis finds.Of these, nearly 2,000 have federal pensions that pay $125,000 or more annually, and 151 take home $150,000 or more. Six federal retirees get more than $200,000 a year.

Some 1.2 percent of federal retirees collect six-figure pensions. By comparison, 0.1 percent of military retirees collect as much.

The New York State and Local Retirement System pays 0.2 percent of its retirees pensions of $100,000 or more. The New Jersey retirement system pays 0.4 percent of retirees that much. Comparable private figures aren't available.

The six-figure pensions spread across a broad swath of the federal workforce: doctors, budget analysts, accountants, public relations specialists and human resource managers. Most do not get Social Security benefits.Retired law enforcement is the most common profession receiving $100,000-plus pensions, including 326 Drug Enforcement Administration agents, 237 IRS investigators and 186 FBI agents.

The Postal Service has 714 retired workers getting six-figure retirements. The Social Security Administration has 444. A retired Smithsonian zoologist has a $162,000 annual lifetime pension.

The six $200,000-plus pensions include a doctor, a dentist and a credit union regulator, plus three retirees whose occupations weren't listed.

"These people are highly trained, highly skilled and often put their lives on the line in law enforcement," says Julie Tagen, legislative director of the "It's a very, very small portion of retirees at that ($100,000) level.""Government pensions are vastly more generous than those in the private sector," says economist Veronique de Rugy of the market-oriented Mercatus Center. "It's no coincidence that if there is a good plan, it's available to federal employees rather than in the private sector."

USA TODAY and the Asbury Park (N.J.) Press— both owned by Gannett — analyzed the Civil Service Retirement System database, obtained under a Freedom of Information Act request. The Office of Personnel Management withheld some information, including names, ages and length of service.

The records cover 1.9 million federal civilian pensions. Congress members were not included, nor were military retirees.

The average federal pension pays $32,824 annually. The average state and local government pension pays $24,373, Census data show. The average military pension is $22,492. ExxonMobil, which has one of the best remaining private pensions, pays an average of $18,250 per retiree, Labor Department filings show.

The federal government has two retirement systems: one for those hired before 1984 and another for those hired after. Under the older system, employees did not participate in Social Security. The older system covers 78 percent of current retirees and accounts for 96 percent of six-figure pensions. All federal retirees receive health benefits.

A Democratic committee chairman overrode his own subpoena three years ago in an investigation of former subprime mortgage lender Countrywide to exclude records showing that he, other House members and congressional aides got VIP discounted loans from the company, documents show.The procedure to keep the names secret was devised by Rep. Edolphus Towns, D-N.Y. In 2003, the 15-term congressman had two loans processed by Countrywide's VIP section, which was established to give discounts to favored borrowers.

The effort at secrecy was reversed when Towns' Republican successor as chairman of the House Oversight and Government Reform Committee, California Rep. Darrell Issa, issued a second subpoena. It yielded Countrywide records identifying four current House members, a former member and five staff aides whose loans went through the VIP unit. Towns was on the list.

Most of the names had dribbled out to the media by the time Issa issued the committee's final report last month on Countrywide's use of loan discounts to buy influence with government officials. But there was no official confirmation until Issa made his report public.

Towns' effort to keep the loans secret was at odds with statements by Republicans and Democrats alike that full disclosure of lawmakers' financial dealings was the best means for keeping the public aware of congressional perks, unethical conduct and fundraising.

Countrywide had been the nation's largest home loan originator before the housing market collapse. Many of its borrowers were left unable to repay mortgages that, in many cases, required no proof of income or a down payment. The company was purchased in 2008 by Bank of America, which now holds the VIP loan files.

The original Towns subpoena had asked for all files that went through the Countrywide VIP unit and specifically mentioned House members and aides. Bank of America sent a spreadsheet that identified 18,000 files that listed a borrower's employer, but without names to maintain privacy.

The spreadsheet identified several files listing the House or Congress as the employer. Since the vast majority of the employers in the spreadsheet were of no interest to the committee, committee Republicans -- then in the minority -- and majority Democrats each drew up a separate list of loan files to be turned over by the bank.

The Republican list totaled 3,000 files and included borrowers listing the House as an employer. Towns narrowed the files to about 300 and excluded references to the House. It was Towns' truncated list that went to Bank of America.

Bank of America confirmed in a statement to The Associated Press that the original subpoena terms were changed by Towns.

"The committee provided the bank with specific instructions and modifications regarding the scope of the subpoena, and the bank followed and fulfilled all instructions and fully complied with the subpoena as modified by the committee," the bank said.

The AP reviewed the original bank spreadsheet of 18,000 and confirmed there were references to the House or Congress. The AP also obtained a copy of the subsequent instructions from Towns to the bank that excluded the House or Congress as an employer.

Some borrowers on the VIP list became known as "Friends of Angelo" because they received discounts on orders from then-Countrywide chief executive Angelo Mozilo.

The foremost benefit of being a Countrywide VIP was access to discounted loans in which borrowers received a reduction in points and fees. Usually between $350 and $400 was waived.

For several months in 2009, Towns refused to issue a subpoena for VIP loan documents to Bank of America, a position that became politically untenable after it was revealed in the media in August that year that he himself had two Countrywide loans.

The Issa committee report confirmed that the VIP section processed a 30-year, $182,972 loan to Towns for a vacation home in Lutz, Fla., and a $194,540, 30-year mortgage for his Brooklyn residence.

Towns still defended his approach when the Oversight Committee met for the first time under Republican control in January 2011. "This is not a super ethics committee and I want to make that very clear," he said at the public meeting.

The Issa report named:

--Towns, who has consistently denied that he received any special treatment from Countrywide.

--Rep. Howard "Buck" McKeon, R-Calif., now chairman of the House Armed Services Committee. A spokeswoman said McKeon was never aware of any Friends of Angelo designation and shares an interest with Issa in determining whether there was any wrongdoing by Countrywide.

--Rep. Elton Gallegly, R-Calif. His spokesman said his Countrywide loan carried an interest rate of 5.75 percent, which was comparable to rates at that time. Gallegly never asked for preferential treatment, the spokesman said.

--Former Rep. Tom Campbell, a California Republican. He said he never received any preference from Countrywide and did not even recall getting a Countrywide loan.

The report also said Rep. Pete Sessions, R-Texas, the current House GOP campaign chairman, had a loan processed by the VIP section. Sessions' spokeswoman said he requested that he not be extended any special benefits or treatment from Countrywide, and Issa's report confirmed the request was granted.

Towns' spokesman said the report does not alter the congressman's assertion that he did not receive any preferential treatment.

As for Towns' actions in 2009, spokesman Charles Lewis said: "He's done talking about it. He said everything he's going to say about it."

Back in October 2009 the Democratic-controlled Oversight Committee's spokeswoman at the time, Jenny Rosenberg, said Towns was the victim of a smear campaign.

She said Towns resisted the subpoena initially because there were other government investigations of Countrywide already under way, and he wanted to focus on investigating companies that received federal bailout money.

Two Democrats publicly broke with Towns on the issue in 2009. One of them, Rep. Mike Quigley of Illinois, said in a recent interview: "A majority of members of the committee wanted disclosure. The committee chairman needed our encouragement to send a subpoena. It looks bad if we redact names."

The second lawmaker, former Rep. Paul Hodes of New Hampshire, said in a recent interview, "I thought we had a mandate to drain the swamp, and I took it seriously."

Two House members said Rep. Chris Van Hollen, D-Md., who is close to Democratic leader Nancy Pelosi, privately conveyed to Towns that it was a bad idea to resist an investigation of member and staff discount loans. The members would not be quoted by name because they said the matter was too politically sensitive.

Only one House member file -- that of McKeon -- was produced under the Towns subpoena and it was by accident. Instead of listing House of Representatives as his employer on his loan documents, McKeon listed "U.S. government" -- which was among the employer categories sought in the Towns request for loan files. That file, however, was sent under the subpoena's instructions to the secretive House Ethics Committee.

Towns' own loan files were not provided under his own subpoena because he listed U.S. Capital (sic) as his employer.

Towns normally would have become the committee's top-ranking Democrat in January 2011 when control of the House switched to Republicans and Issa became the panel's chairman. Instead, the leadership supported Rep. Elijah Cummings of Maryland, who took over the position.

Towns announced in April that he was retiring after 30 years of representing his Brooklyn district.

Internal Revenue Service supervisors discouraged employees from rooting out fraud in a program that assigns taxpayer identification numbers to non-U.S. residents and others who don't qualify for a Social Security number, according to a report Wednesday from the Treasury inspector general for tax administration.The management failures—including a focus on processing applications quickly instead of accurately—allowed the creation of fictitious identities, meaning that some people who didn't qualify ended up with a taxpayer identification number, the Treasury inspector general for tax administration found. The result could be fraudulent tax returns, the report said. It didn't quantify the number of such returns, if any, or the extent to which people may have received tax refunds they didn't deserve.

The report examined one corner of the tax system, a segment that consisted of 2.9 million returns last year and resulted in $6.8 billion in refunds sent to people with taxpayer identification numbers. It is likely to add to existing concerns about identity fraud in the tax system, even though the IRS has indicated it plans to take many of the proposed corrective measures.

The audit found that "IRS management has not established adequate internal controls to detect and prevent the assignment of an ITIN to individuals submitting questionable applications," J. Russell George, the Treasury inspector general for tax administration, said in a statement.

Mr. George cited "an environment which discourages employees from detecting fraudulent applications" but said that "to their credit, the IRS recently announced a series of improvements that will take effect immediately on an interim basis, in response to our findings."

Among the changes that the IRS has agreed to: more training and an expanded quality-review process that emphasizes the accurate identification of fraudulent documents.

The IRS also said it would begin requiring people who apply for a taxpayer ID to submit originals of documents such as driver's licenses and birth certificates, or copies as long as they are certified by the issuing agency. The IRS had been accepting notarized documentation. The report said that notaries only certify the identity of signers and not the legitimacy of documents that they notarize.

The inspector general initiated the audit after IRS employees complained about how the taxpayer-identification number program was managed. IRS tax examiners had said that training was not adequate, with only one hour of a total 39.5 hours of training spent on questionable documentation.

The examiners also complained they weren't penalized for failing to identify certain issues, but could be charged with an error if their findings differed from the opinion of a quality reviewer—potentially affecting whether they were called back for seasonal work.

"So where is the incentive to report fraud?" said one examiner in a comment cited in the report.

One issue the report cited is that a former IRS manager eliminated a team in place from October 2007 to April 2010 that reviewed all questionable applications. The group, known as the Questionable Identification Detection Team, was charged with discovering patterns involving questionable applications.

The report found that despite the group's successes, the former director of the submission processing center in Austin, Texas, disbanded the program, stating that other IRS programs would identify and stop fraudulent tax returns.

The IRS has been struggling with identity fraud in recent years. In June, the IRS Oversight Board said that the number of total fraudulent returns filed had increased more than fourfold over two years, jumping to 2.18 million last year. Earlier this month, the IRS said that the problem may have been worse than previously thought, and that as many as 1.5 million returns claiming $5.2 billion in fraudulent refunds might have escaped detection last year.

Tax-related identity fraud has become more of a problem as electronic processing of refunds has speeded up payments, and as Congress has created more tax breaks allowing for refunds from the IRS.

One tax break noted in the report is the additional child tax credit, a refundable credit worth as much as $1,000 per child that can be paid out even it exceeds a taxpayer's total federal income tax. For individual taxpayer IDs assigned in 2011, more than 481,500—or 71%—were associated with claims for the additional child tax credit, totaling more than $916 million, the report found.

he U.S. Postal Service on Thursday reported a $5.2 billion quarterly loss and said it was nearly out of cash and likely to exhaust its government credit line in coming months.

The agency said the loss was its largest since it began releasing quarterly financials in 2007. But Postmaster General Patrick Donahoe said the Postal Service would do whatever it takes to maintain its operations, even if that means defaulting on a second multi-billion-dollar retiree obligation in as many months."We will do everything we need to do to make sure the mail is delivered," he said. "Congress needs to act responsibly and move on this legislation." Losses and defaults will continue, despite cost cutting efforts, unless Congress passes a postal overhaul bill, Mr. Donahoe said.The Postal Service's loss for its third quarter ended June 30 compared with a $3.1 billion loss for the like period a year earlier. Charges taken in connection to a mandate to prefund retiree health care drove the loss in the latest quarter, but declining first-class and advertising mail volume were a drag on revenue.Mr. Donahoe said the Postal Service would pay its employees and critical vendors but might skip some payments to others.He said current retirees aren't at risk of losing insurance coverage. While the Postal Service may tap all its credit from the U.S. Treasury by October, finances should improve later in the year with election mail and holiday deliveries propping up revenue, the agency said.The Postal Service defaulted for the first time in its history on Aug. 1, failing to pay $5.5 billion for future retiree health benefits. A similar $5.6 billion payment is due at the end of next month. The agency said it wouldn't make that either, unless Congress acts.The Senate passed postal overhaul legislation earlier this year, but the House hasn't take up the bill or a plan drafted by Republicans."I'm not sure how much more evidence leaders in the House of Representatives need before they realize that the Postal Service is in dire straits," said Sen. Tom Carper (D., Del.), one of the Senate bill's authors.A spokesman for the House Oversight and Government Reform Committee said no date has been set to take up the legislation.

The Postal Service has criticized the Senate plan for not going far enough. For example, the bill makes it difficult for the Postal Service to implement its plan to cut delivery to five days a week to reduce costs.Rep. Dennis Ross (R., Fla.), a co-author of the House bill, said Thursday's loss shows the Senate bill, which would eliminate the prefunding requirement and return pension overpayments, isn't enough. "These declines, without right-sizing the expense side of the postal equation, spell the end of the Postal Service," he said.The House bill, which allows for more sweeping changes that would enable the post office to cut costs sooner, has met resistance from some lawmakers who are concerned it would lead to slower service and more post-office closings.Excluding losses tied to retiree health care and workers' compensation, the Postal Service lost $1 billion in the last quarter. That marks an improvement from a year earlier when the operating loss totaled $1.3 billion.By the end of this month, the Postal Service will have closed 48 mail-processing plants this year. It plans to shut 92 more next year.In a positive sign, the agency said it is seeing growing sales from its parcel business. Led by "If It Fits, It Ships" service, the shipping revenue was up 9.9% for the quarter. That wasn't nearly enough to make up for a 3.1% decline in first-class mail, still the main revenue driver.

In the 18 months the 112 th Congress has been sworn in, the House has introduced 60 bills to rename post offices. Thirty-eight have passed the House and 26 have become law. During those 18 months, the House has produced 151 laws, 17 percent of which have been to rename post offices, according to Congressional Democrats.

Not a single bill has come to the House floor aimed at reforming a Postal Service, which is bleeding billions of dollars because of Congressional mandates.

Today the United States Postal Service will default on a Congressional mandate to pay $5.5 billion to "prefund" health benefits for future retirees. On Friday, House of Representatives will leave town for a five week summer vacation. There is no plan to take up postal reform before that summer recess.

The Postal Service has attempted to enact an array of cost-cutting measures to pull itself out of a $22.5 billion budget shortfall. Over the past five years USPS has cut more than 110,000 employees. The mail service, which takes no taxpayer money but is regulated by Congress, has announced plans to close or consolidate 230 mail processing centers, cutting 13,000 jobs and saving an estimated $1.2 billion annually.

The service attempted to close 3,700 post offices under a plan announced last year, but after public outcry decided to cut operating hours to between two and six hours per day at 13,000 locations. USPS claims that move will save $500 million per year.

One of the largest cost-saving measures would be ending Saturday mail delivery , a move the Postal Service says will save $3.1 billion a year. But USPS can't cut delivery without Congressional approval, and partisan disagreements over whether Congress should take control of USPS's operations until it is solvent again or if it should leave the decision making to the postmaster general have halted any action on Capitol Hill.

USPS claims that if Congress does not act, the mail service will default not only on the $5.5 billion payment due today, but also on another $5.6 billion payment for future retiree's benefit due September 30.

The Postal Service has pleaded with Congress for years to end the requirement that it pre-fund its retiree's health benefits. But many lawmakers claim that because USPS has such a massive workforce - there are 614,000 Postal Service employees-if it does not pre-fund retirement benefits, it will not be able to pay them in the future.

And as long as these disagreements persist, it looks like naming post offices is the closest Congress will get to passing postal reform.

New data from the White House suggest the federal government will hit its $16.395 trillion debt ceiling in mid- to late-December.

Here’s how we came to the December projection:

The White House on Friday said it estimates the deficit in fiscal year 2012, which ends Sept. 30, will reach $1.211 trillion. For the first nine months of the fiscal year, the deficit was $904.2 billion. That means the White House believes the cumulative deficit in July, August, and September will be $307 billion, or $102.3 billion a month. That’s pretty much on track with the monthly deficit average over the last 12 months – $102.6 billion.

Stay with us.

On June 30, the government had $15.816 trillion in debt subject to the $16.394 trillion borrowing limit. So, if the government, going forward, adds $102.3 billion in debt, it will hit $16.326 trillion in debt at the end of November. By the end of December, the government is set to hit $16.428 trillion, or $33 billion more than is statutorily allowed. In other words, a few days before Christmas, the folks at the Treasury Department’s debt management office probably won’t have too much time for holiday shopping.

Keep in mind that once the government hits the debt ceiling, the Treasury Department has some wiggle room and can maneuver for a few more weeks using emergency measures.

And much can change. If the economy rebounds and tax revenue begins pouring in, the government might be able to squeeze by for a few more weeks. Or if Congress agrees on some deal that dramatically cuts government spending through the end of the year, they could also buy a bit more time.

But based on current projections and past performance, the U.S. government appears to have a date with the debt ceiling sometime around Dec. 20.

Ben Bernanke heads the most powerful central bank in the world. Yet the Federal Reserve chairman says he was largely powerless to stop what some are calling the biggest financial fraud in history: the systematic manipulation of a key global interest rate.It's a line of argument that has fallen flat with some lawmakers and investors, who want to know why Bernanke and other key U.S. regulators did not do more to end a potentially criminal rigging of interest rates affecting trillions of dollars in financial contracts.

Bernanke said last week he had been largely unable to directly address problems with Libor, or the London interbank offered rate, which he said he learned of in 2008.

"We are and need to continue advocating for reforms to the Libor process. It is constructed by a private organization in the UK, and so our direct ability to influence that is limited," Bernanke said in congressional testimony.

Timothy Geithner, who oversaw Wall Street as president of the New York Fed for five years before he became Treasury Secretary in 2009, has delivered much the same message.

He told lawmakers this week that he informed regulators "early on" about the problems and made recommendations to the Bank of England on how to reform the system.

"Seriously? They did all that they could do? I mean, come on," said Alan De Rose, managing director of government and trading finance at Oppenheimer in New York.

"Answers like those, they strain credibility," said De Rose, formerly a trader at a U.S. primary dealer, the selected large banks that do business directly with the Fed.

Legislators are similarly skeptical, at a time when the Fed is already taking heat in Congress for its regulatory failings that contributed to the financial crisis.

Republican Congressman Scott Garrett took aim at Geithner at a hearing of the House of Representatives' Financial Services Committee on Wednesday.

"You have been before this committee countless numbers of times since 2008 and if this is the crime of the century, as so many people are reporting today, never once did you ever once come and mention it as being a problem, never once did you come here and say this is what you're going to do about it," he said.

The revelations about Libor have further dented public confidence in the financial industry, which has been battered by a string of crises that led to unpopular taxpayer bailouts in many advanced economies. It is also another blow to the standing of regulators who have been widely accused of being asleep at the switch in the run-up to the financial crisis of 2008-2009.

Geithner told lawmakers this week he contacted the appropriate regulatory authorities, including the Bank of England, quickly after being informed that there were suspicions about the veracity of rates being reported by banks.

"We, at least I, first learned about those concerns in the early parts of spring of 2008 and we acted very quickly at that stage," Geithner said. "We took a very careful look at these concerns, we thought those concerns were justified."

The Federal Reserve Board, the New York Fed and the Treasury all declined to comment for this article.

Policymakers had a lot on their plate in 2008 as the global financial system was at risk of melting down.

JAY-WALKING OR HIGHWAY ROBBERY?

As well as wondering why U.S. regulators failed to follow up with the British authorities after no immediate corrective steps were taken, lawmakers noted the Fed itself continued to use Libor as a benchmark in its emergency lending programs, including the controversial bailout of failed insurer AIG.

"It appears that the early response was to keep using it, which means it appears that you treated it as almost a curiosity or something akin to jay-walking instead of highway robbery," Republican Congressman Jeb Hensarling told Geithner this week.

Robert Shapiro, a former undersecretary of the U.S. Commerce Department who now runs Sonecon, an advisory firm in Washington, says the scandal is vast and will continue to grow.

"Barclays is not some lone, bad apple. This could well turn into the largest consumer fraud ever seen," Shapiro said.

Barclays last month admitted to giving false information as part of setting the interest rate in a record $453 million settlement with U.S. and UK authorities.

Dozens of big banks, including JPMorgan Chase & Co, are under investigation. An internal probe at Deutsche Bank found two former traders may have been involved in colluding to manipulate global benchmark interest rates but suggested top managers were unaware of the fraud.

Things could get more embarrassing for U.S. regulators. The House Financial Services Committee has asked the New York Fed for all communications going back to August 2007 with the banks that helped set Libor.

The first trove of documents from the New York Fed showed Barclays had flagged concerns as early as 2007 and Geithner sent the email to Bank of England governor Mervyn King in June 2008 with the Libor recommendations.

Still, analysts do not see immediate repercussions for Bernanke and Geithner other than the risk of an additional loss of public confidence.

Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank in Washington, says the comments from Bernanke stretch credulity, particularly after the Fed fought hard to keep regulatory power over banks in post-financial crisis reforms.

"He is insulting his audience to say there was nothing they could do," Baker said. "That is complete nonsense. If he had called up King and said that he has to fix the Libor, and if he doesn't this all goes public, then King would have no choice."

"I think this is a case of the central bankers being a good old boys club and that would be considered rude behavior. Rather than break the rules of the club, Bernanke allowed this fraud to continue, violating his responsibilities as Fed chair."

The apparently mild nature of Geithner's warnings about Libor to the Bank of England allowed King to claim he was never informed of accusations of fraud at all, critics say.

Simon Johnson, a former chief economist at the International Monetary Fund, lambasted the Fed.

"The Federal Reserve is responsible for the 'safety and soundness' of the financial system in the United States," said Johnson, now a professor at the MIT Sloan School of Management.

"Does allowing suspicions of fraud to continue unchecked at the heart of this system help to sustain the credibility and legitimacy of markets? Surely not."

Democrats and Republicans are negotiating to extend current federal spending levels for six months after the fiscal year ends Sept. 30, House and Senate aides said, a move that would avoid the threat of a government shutdown just a month before the election.

Leaders of both parties said the six-month time frame hasn't been set in stone. "Discussions are going on. They have been very productive, and I'm hopeful and confident we can reach a conclusion in the near future," Senate Majority Leader Harry Reid (D., Nev.) said this week.

House Speaker John Boehner (R., Ohio) was similarly optimistic. "I'm confident we'll be able to come to an agreement with our colleagues in the Senate," he said. "Our goal would be to make sure the government is funded and any political talk of a government shutdown is put to rest."

Such an outcome would represent a concession from conservative Republicans who favor a spending level lower than the $1.047 trillion the two parties agreed to in a sweeping budget deal last August. Many conservatives fear a shutdown battle would play into Democrats' hands.

It also means the funding legislation would expire at the end of March, two months into the tenure of a new Congress and either a newly re-elected president or a new one.

The spending agreement would avert one fight, but it would leave Congress to grapple with two other challenges at year's end: the expiration of the Bush-era tax cuts and the automatic spending cuts of $1.2 trillion, both set to occur in January. Lawmakers plan to tackle those issues in a post-election "lame duck" session before the new year begins.

This Congress has been wracked by debates over spending and taxes, and on several occasions came near a government shutdown or default. Both parties have emerged from these fights with their images tarnished, and Congress's approval rating has fallen to historic lows.

Last August, facing the prospect of a government default, the two sides struck a budget deal that included $1.047 trillion in discretionary spending for fiscal 2013, a figure that excludes formula-based programs such as Social Security and Medicare.

In March, House Republicans approved a budget by Rep. Paul Ryan (R., Wisc.) that set the level at $1.027 trillion. Democrats accused them of reneging on the earlier deal. At the time, House leaders said the $1.047 figure had been an upper limit, not an ironclad amount.

Now, however, Republicans have concluded a government shutdown threat shortly before the election would hurt them politically. The idea of avoiding a budget battle this fall, and letting a new Congress tackle the matter, appeals to both sides.

Members of the Appropriations committees, who are charged with working out the spending levels for each government program each year, are likely to be upset at being superseded by a blanket extension of current funding levels.

Some sticky issues still must be worked out. Some conservatives, for example, are likely to push to remove funding for social policies they disagree with, for example President Barack Obama's recent regulation requiring that health plans cover contraception.

Muskegon Heights and Highland Park—two of Michigan's most insolvent school districts—this year are handing their classroom keys over to charter school operators to save money. That's good news for local taxpayers, but the biggest beneficiaries may be the kids.

Both districts were running deficits that approached two-thirds of their budgets, thanks to the double whammy of rising labor costs and declining enrollment. To help the districts avert bankruptcy, Governor Rick Snyder appointed emergency managers who under a new state law can break collective-bargaining agreements. While such flexibility was essential to get their books in order, it may not have been sufficient.

According to Muskegon Heights manager Don Weatherspoon, the district would have to slash salaries by 35%—reducing hourly wage rates to about $10—merely to break even. That would have likely caused a teacher walk-out. When the emergency manager for Detroit schools last month proposed extending a 10% pay cut for a year, teachers threatened to strike.

Mr. Weatherspoon and his counterpart in Highland Park figured that farming out their districts to charter school operators was a better alternative. Under their plan, the charters will receive per-pupil funding from the state like traditional public schools, but local property taxes will go toward paying down the district's debt. The charter operators will also bring some of their own money to the table. While the fierce taxpayer watchdogs at the teachers unions bark about the government "subsidizing" private companies, the schools will be run as nonprofits.

The ones who really stand to profit are students. Both districts' schools rank among the worst in the state. Only a quarter of seventh-graders in Highland Park (in eastern Michigan near Detroit) and a third in Muskegon Heights (in the west near Lake Michigan) are proficient in reading. Fewer than 8% meet the state's math standards. While Michigan students can transfer to schools with open space, schools close enough are usually as bad, if not worse. The only option for most Highland Park students are Detroit schools, which have even lower test scores. Some "choice."

So now students will have a real alternative. School choice advocates hope (and union leaders fear) that the charter systems, which won't be bound by labor agreements, will serve as laboratories for reform. Muskegon Heights's charter operator Mosaica plans to experiment with new technologies in the classroom and pay and hire teachers based in part on their performance. As test scores improve, the charters hope to draw students from nearby cities, which could help the districts with their financial problems.

There's little to prevent other districts from converting low-performing schools to charters—other than political intransigence. A new state law uncaps the number of charters and exempts their employees from district collective bargaining agreements. Muskegon Heights and Highland Park only include a handful of schools, but ideally larger districts would authorize multiple charter operators in order to encourage competition among schools.

The two Michigan districts may be textbook cases of fiscal mismanagement, but they also highlight the opportunity that insolvency presents to innovate—if leaders will take it.

Business owners will pay $4 billion more in taxes under President Obama’s Affordable Care Act (ACA) than the Congressional Budget Office had previously expected.

“According to the updated estimates, the amount of deficit reduction from penalty payments and other effects on tax revenues under the ACA will be $5 billion more than previously estimated,” the CBO reported today. “That change primarily effects a $4 billion increase in collections from such payments by employers, a $1 billion increase in such payments by individuals, and an increase of less than $500 million in tax revenues stemming from a small reduction in employment-based coverage, which will lead to a larger share of total compensation taking the form of taxable wages and salaries and a smaller share taking the form of nontaxable health benefits.”

In short, CBO revised the Obamacare tax burden upward by $4 billion for businesses and $1 billion to $1.5 billion for individual workers.

CBO couldn’t help but bump into Chief Justice John Roberts controversial decision uphold the individual mandate as a constitutional exercise of Congress’s taxing power. The report dubs the individual mandate a “penalty tax” — that is, “a penalty paid to the Treasury by taxpayers when they file their tax returns and enforced by the Internal Revenue Service.”